The Budget 2018 announcement of increase in custom duty on mobile phone imports was largely expected

Highlights

In Budget 2018, customs duty on phones raised to 20 percent

Apple most likely to be affected as Xiaomi, Samsung mostly make in India

This was first introduced in July at 10% and raised in December to 15%

In the Union Budget 2018 speech, the customs duty on mobile phones has been raised again from 15 percent to 20 percent. This is a Budget 2018 announcement aimed at increasing the local production of phones in India, as those devices do not come under this duty and can, therefore, be sold much more cheaply. The government first announced a duty of 10 percent in July 2017. After just half a year, that was then raised to 15 percent in December. With Budget 2018, it has been brought to 20 percent, less than two more months down the line.

As such, the Budget 2018 move is likely to increase the number of handsets being made in India - more than half already are, according to Counterpoint Research. "This is an expected move but Industry will look forward to more such announcements from components manufacturing perspective," says Tarun Pathak, Associate Director at Counterpoint Research. "Almost three-fifth of total handsets out of 300 million last year were assembled in India. The increase in duty will further increase the local assembling share as brands will ramp up their current output from local EMS [Electronics Manufacturing Services] facilities since capacity is already there."

A few brands, particularly in the premium space, are most likely to be affected by this decision, as Pathak points out. "This is going to impact few players like Apple, which are heavily dependent on imports. This is also a good news for local EMS players which can see a greater participation and long-term engagement from OEMs perspective."

"Mobile phones companies are looking for growth market like India and this can push them towards investing more in manufacturing in India," added Satish Meena, of Forrester Research. "[It] also helps in the government focus of job creation. I still don't believe that this will help the Indian smartphone manufacturers because they lost the market due to lack of innovation an product quality, so things might not change a lot for them."

"This [Budget 2018] move of duty increase can be considered as a primitive step to further strengthen the local manufacturing in the country under 'Make in India' initiative by the government of India," said Jaipal Singh, Senior Market Analyst for IDC India. "Though [given that] almost 90 percent of the smartphones are now assembled in India, it won't impact much on the overall smartphone as a category. But this calls for long-term commitment and investments from the players who are still depending on importing the handset in India. Like from Apple’s point of view, it will certainly impact them in the near term as most of their devices are still imported in India."

"In long term, this will push all the vendors to start manufacturing the entire range of devices in India to enjoy the incentives and remain competitive in a market like India," Singh added.

Other big brands have taken to assembling in India. "HMD Global continues its strong emphasis on PM Modi’s Make in India campaign," said Ajey Mehta, Vice President India, HMD Global. "While the import duties for mobile phones increased to 20 percent, along with a 15 percent duty on key components, this will have a minimum impact on our business, as all of our current portfolio of Nokia phones are manufactured in India." Samsung also told Gadgets 360 that all phones sold in India are manufactured locally so it will not be impacted by the decision.

Most of Xiaomi's phones are made in India as well, with the exception of the Xiaomi Mi Mix 2, the company confirmed. Until now, Apple only only assembles its iPhone SE models in India and imports its other devices. However, the company could be adding the iPhone 6s to this list, as a new report states that its supplier, Wistron, has been scouting for land in and around Bengaluru to set up a plant for the phone, which remains popular in India as it's cheaper than the newer iPhone 8 and iPhone X devices.

Other companies likely to be affected by this Budget 2018 announcement are Vivo, Huawei, and Oppo, analysts told Gadgets 360.